January 29, 2010

 

US Wheat Outlook on Friday: Seen starting down 1-3 cents on follow-through

 

 

U.S. wheat futures are poised to start slightly lower Friday on follow-through selling from the overnight session, but prices could drift higher on technical buying and month-end positioning, traders said.

 

Chicago Board of Trade March wheat is called to open down 1 to 3 cents per bushel. In overnight electronic trading, CBOT March wheat fell 2 1/2 cents to US$4.84 1/2.

 

Prices stumbled overnight with neighboring CBOT corn and soybeans in a slight setback from gains Thursday. Large ending stocks and worries about slow demand continue to be fundamentally bearish for wheat, an analyst said.

 

The markets could find some support from technical buying and short-covering, a broker said. Holders of short positions will want to take profits on the last trading day of the month, he said.

 

"The markets are technically overdone and they're due for bounce, but we're not seeing anything else out there improve for this wheat market," said Tom Leffler, owner of Leffler Commodities.

 

Weekly U.S. wheat export sales have improved for the past two weeks as a drop in prices attracted buyers. As of Thursday's close, CBOT March wheat was down 85 1/2 cents since Jan. 12, when the U.S. Department of Agriculture released bearish crop data for the grains.

 

The recent pick-up in export demand looks "good compared to what we've been seeing," Leffler said. Competition for business has hurt U.S. wheat exports this marketing year. However, export sales probably won't improve enough "to make up for what we lost out on" earlier in the marketing year, Leffler said.

 

"The wheat market is still vulnerable to an upside correction if more positive export news is found," Benson Quinn Commodities said in a note. "Rallies are still meant to be sold until proven otherwise."

 

FuturesTechs said it was "still bearish" about the wheat market. A target of US$4.61 looks "reasonable" for CBOT March wheat, but the contract has support at US$4.82 3/4, the firm said.

 

The next downside price objective for the bears is pushing and closing CBOT March wheat below solid technical support at the October low of US$4.59, a technical analyst said. Bulls' next upside price objective is to push and close the contract above solid technical resistance at this week's high of US$5.04, he said.

 

First resistance is seen at US$4.91 1/2 and then at US$4.95, the analyst said. First support lies at Thursday's low of US$4.82 3/4 and then at US$4.75, he said.